Silgan Announces Second Quarter Earnings; Confirms Full Year Estimate

Closed acquisition of Dispensing Systems Business and advanced
integration activities

Redeemed $220 million 5% senior notes due 2020

July 26, 2017 07:00 AM Eastern Daylight Time

STAMFORD, Conn.--(EON: Enhanced Online News)--Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid
packaging for consumer goods products, today reported second quarter
2017 net income of $27.9 million, or $0.25 per diluted share, as
compared to second quarter 2016 net income of $33.3 million, or $0.27
per diluted share.

“Based upon our performance to date and continued confidence in
achieving our proposed synergy targets for the Dispensing Systems
operations, we are confirming our full year 2017 earnings estimate of
adjusted net income per diluted share in the range of $1.60 to $1.70”

“We are pleased with our second quarter 2017 results, as we reported
adjusted net income per diluted share of $0.35, an increase of 16.7
percent over the prior year period with improvement in each of our
businesses,” said Tony Allott, President and CEO. “Our results include
the recently acquired Dispensing Systems operations, which is performing
well and making good progress towards integration and synergy targets.
Our metal and plastic container businesses continue to benefit from
lower manufacturing costs and improved efficiencies resulting from our
recently completed footprint optimization program. Our closures business
benefitted from the inclusion of Dispensing Systems in the quarter, and
the legacy operations performed well primarily due to manufacturing cost
savings and efficiencies, partially offset by lower unit volumes as
compared to record volumes in the prior year quarter,” continued Mr.
Allott. “Based upon our performance to date and continued confidence in
achieving our proposed synergy targets for the Dispensing Systems
operations, we are confirming our full year 2017 earnings estimate of
adjusted net income per diluted share in the range of $1.60 to $1.70,”
continued Mr. Allott.

Adjusted net income per diluted share was $0.35 for the second quarter
of 2017, after adjustments increasing net income per diluted share by
$0.10. Adjusted net income per diluted share was $0.30 for the second
quarter of 2016, after adjustments increasing net income per diluted
share by $0.03. A reconciliation of net income per diluted share to
“adjusted net income per diluted share,” a Non-GAAP financial measure
used by the Company that adjusts net income per diluted share for
certain items, can be found in Tables A and B at the back of this press
release. All per share amounts have been adjusted for the two-for-one
stock split that occurred on May 26, 2017.

Net sales for the second quarter of 2017 were $1,021.8 million, an
increase of $147.2 million, or 16.8 percent, as compared to $874.6
million in 2016. This increase was the result of the acquisition of
Dispensing Systems in April 2017 and higher net sales across all of the
businesses.

Income from operations for the second quarter of 2017 was $75.2 million,
an increase of $7.5 million, or 11.1 percent, as compared to $67.7
million for the second quarter of 2016, while operating margin decreased
to 7.4 percent from 7.7 percent for the same periods. The increase in
income from operations was the result of the net benefit from the
acquisition of Dispensing Systems and higher income from operations in
each of the businesses. The decrease in operating margin was due
primarily to the negative impact from the purchase accounting write-up
of inventory of Dispensing Systems and acquisition related costs in the
quarter. Rationalization charges were $3.0 million and $5.0 million in
the second quarters of 2017 and 2016, respectively.

Interest and other debt expense before loss on early extinguishment of
debt for the second quarter of 2017 was $29.1 million, an increase of
$12.2 million as compared to the second quarter of 2016. This increase
was primarily due to higher average outstanding borrowings as a result
of additional borrowings under the senior secured credit facility for
the acquisition of Dispensing Systems in April 2017 and higher weighted
average interest rates, including the impact from increasing long-term
fixed rate debt through the issuance in February 2017 of the 4 3/4%
senior notes due 2025 and the 3 1/4% senior notes due 2025. Loss on
early extinguishment of debt of $4.4 million in the second quarter of
2017 was primarily a result of the partial redemption of the 5% senior
notes due 2020 in April 2017.

The effective tax rates were 33.0 percent and 34.4 percent for the
second quarters of 2017 and 2016, respectively. The effective tax rate
in the second quarter of 2017 benefitted from the settlement of a state
tax audit.

Metal Containers

Net sales of the metal container business were $529.7 million for the
second quarter of 2017, an increase of $0.1 million, as compared to
$529.6 million in 2016. This increase was primarily the result of the
pass through of higher raw material costs, mostly offset by a less
favorable mix of products sold and the impact of unfavorable foreign
currency translation.

Income from operations of the metal container business in the second
quarter of 2017 increased $3.5 million to $49.4 million as compared to
$45.9 million in 2016, and operating margin increased to 9.3 percent
from 8.7 percent over the same periods. The increase in income from
operations was primarily attributable to lower manufacturing costs and
lower rationalization charges, partially offset by the unfavorable
impact of a $3.0 million charge related to the resolution of a past
non-commercial legal dispute, a smaller build in inventory in the second
quarter of 2017 as compared to the prior year period, higher
depreciation expense, foreign currency transaction losses in the current
year quarter and the unfavorable impact from the contractual pass
through to customers of indexed deflation. Rationalization charges were
$2.2 million and $4.0 million in the second quarters of 2017 and 2016,
respectively.

Closures

Net sales of the closures business were $349.1 million in the second
quarter of 2017, an increase of $142.6 million, or 69.1 percent, as
compared to $206.5 million in the second quarter of 2016. This increase
was primarily the result of the inclusion of the recently acquired
Dispensing Systems operations and the pass through of higher raw
material costs, partially offset by lower unit volumes of approximately
2 percent in the legacy closures operations principally due to lower
sales for single-serve beverages as compared to record volumes in the
prior year period and the impact of unfavorable foreign currency
translation.

Income from operations of the closures business for the second quarter
of 2017 increased $8.5 million to $33.8 million as compared to $25.3
million in 2016, while operating margin decreased to 9.7 percent from
12.3 percent over the same periods. The increase in income from
operations was primarily due to the acquisition of Dispensing Systems
and manufacturing cost savings and efficiencies, partially offset by
lower unit volumes in the legacy closures operations. Operating margin
was unfavorably impacted due to the write-up of inventory of Dispensing
Systems for purchase accounting.

Plastic Containers

Net sales of the plastic container business were $143.0 million in the
second quarter of 2017, an increase of $4.5 million, or 3.2 percent, as
compared to $138.5 million in the second quarter of 2016. This increase
was principally due to the pass through of higher raw material costs,
partially offset by a less favorable mix of products sold and the impact
of unfavorable foreign currency translation.

Income from operations of the plastic container business for the second
quarter of 2017 was $6.7 million, an increase of $5.7 million as
compared to $1.0 million in 2016, and operating margin increased to 4.7
percent from 0.7 percent over the same periods. The increase in income
from operations was primarily attributable to lower manufacturing costs,
partially offset by higher depreciation expense.

Six Months

Net income for the first six months of 2017 was $51.2 million, or $0.46
per diluted share, as compared to net income for the first six months of
2016 of $59.9 million, or $0.49 per diluted share. Adjusted net income
per diluted share for the first six months of 2017 was $0.66 versus
$0.52 in the prior year period, after adjustments increasing net income
per diluted share by $0.20 for the first six months of 2017 and
adjustments increasing net income per diluted share by $0.03 for the
first six months of 2016.

Net sales for the first six months of 2017 increased $159.8 million, or
9.6 percent, to $1.83 billion as compared to $1.67 billion for the first
six months of 2016. This increase was a result of higher net sales in
each of the businesses primarily due to the acquisition of Dispensing
Systems, the pass through of higher raw material costs across all
businesses, a favorable mix of products sold in the metal container
business and slightly higher volumes in the plastic container business,
partially offset by the impact of unfavorable foreign currency
translation, a less favorable mix of products sold in the plastic
container business and lower unit volumes in the legacy closures
operations.

Income from operations for the first six months of 2017 was $132.0
million, an increase of $6.9 million, or 5.5 percent, from the same
period in 2016, while operating margin decreased to 7.2 percent from 7.5
percent for the same periods. The increase in income from operations was
a result of higher income from operations in each of the businesses
primarily due to lower manufacturing costs in each of the businesses,
the acquisition of Dispensing Systems, a favorable mix of products sold
in the metal container business, lower rationalization charges and
slightly higher volumes in the plastic container business. These
increases were partially offset by acquisition related costs of $23.0
million, higher depreciation expense, the unfavorable impact related to
the resolution of a past non-commercial legal dispute, a smaller build
in inventory in the metal container business in the current year period,
the unfavorable impact from the contractual pass through to customers of
indexed deflation in the metal container business and lower unit volumes
in the legacy closures operations. Operating margin was unfavorably
impacted due to acquisition related costs and the write-up of inventory
of Dispensing Systems for purchase accounting. Rationalization charges
were $3.9 million and $6.1 million in the first six months of 2017 and
2016, respectively.

Interest and other debt expense before loss on early extinguishment of
debt for the first six months of 2017 was $49.6 million, an increase of
$16.3 million as compared to the same period in 2016. This increase was
primarily due to higher weighted average interest rates, including the
impact from increasing long-term fixed rate debt through the issuance in
February 2017 of the 4 3/4% senior notes due 2025 and the 3 1/4% senior
notes due 2025, and higher average outstanding borrowings primarily as a
result of additional borrowings under the senior secured credit facility
for the acquisition of Dispensing Systems in April 2017. Loss on early
extinguishment of debt of $7.1 million in 2017 was a result of the
prepayment of outstanding U.S. term loans and Euro term loans under the
previous senior secured credit facility in conjunction with the issuance
of the new senior notes and the partial redemption of the 5% senior
notes due 2020 in April 2017.

The effective tax rate for the first six months of 2017 was 32.1 percent
as compared to 34.7 percent for the first six months of 2016. The
effective tax rate in 2017 benefitted from the settlement of a state tax
audit. The effective tax rate in 2016 was unfavorably impacted by the
cumulative adjustment of a change in tax law in a certain foreign
jurisdiction, partially offset by higher income in more favorable tax
jurisdictions.

Outlook for 2017

The Company confirmed its estimate of adjusted net income per diluted
share for the full year of 2017, which excludes transaction related
costs attributed to announced acquisitions, rationalization charges and
loss from early extinguishment of debt, in the range of $1.60 to $1.70.
This estimate compares to adjusted net income per diluted share for the
full year of 2016 of $1.38.

The Company is providing an estimate of adjusted net income per diluted
share for the third quarter of 2017, which excludes transaction related
costs attributed to announced acquisitions and rationalization charges,
in the range of $0.64 to $0.71. Given the uncertainties around the
timing of the fruit and vegetable harvest in the U.S. and Europe, the
results of the back half of the year could shift between the third and
fourth quarters. This estimate compares to adjusted net income per
diluted share of $0.61 in the third quarter of 2016.

Conference Call

Silgan Holdings Inc. will hold a conference call to discuss the
Company’s results for the second quarter of 2017 at 11:00 a.m. Eastern
time on July 26, 2017. The toll free number for those in the U.S. and
Canada is (877) 856-1968, and the number for international callers is
(719) 457-2615. For those unable to listen to the live call, a taped
rebroadcast will be available through August 9, 2017. To access the
rebroadcast, U.S. and Canadian callers should dial (888) 203-1112, and
international callers should dial (719) 457-0820. The pass code is
2059827.

Silgan is a leading supplier of rigid packaging for consumer goods
products with annual net sales, on a pro forma basis to include the
Dispensing Systems operations which was acquired on April 6, 2017, of
approximately $4.2 billion in 2016. Silgan operates 100 manufacturing
facilities in North and South America, Europe and Asia. The Company is a
leading supplier of metal containers in North America and Europe for
food and general line products. The Company is also a leading worldwide
supplier of metal and plastic closures and dispensing systems for food,
beverage, health care, garden, home and beauty products. In addition,
the Company is a leading supplier of plastic containers for shelf-stable
food and personal care products in North America.

Statements included in this press release which are not historical facts
are forward looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and
the Securities Exchange Act of 1934, as amended. Such forward looking
statements are made based upon management’s expectations and beliefs
concerning future events impacting the Company and therefore involve a
number of uncertainties and risks, including, but not limited to, those
described in the Company’s Annual Report on Form 10-K for 2016 and other
filings with the Securities and Exchange Commission. Therefore, the
actual results of operations or financial condition of the Company could
differ materially from those expressed or implied in such forward
looking statements.

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the quarter and six months ended June 30,

(Dollars in millions, except per share amounts)

Second Quarter

Six Months

2017

2016

2017

2016

Net sales

$

1,021.8

$

874.6

$

1,827.2

$

1,667.4

Cost of goods sold

856.6

746.9

1,537.4

1,425.8

Gross profit

165.2

127.7

289.8

241.6

Selling, general and administrative expenses

87.0

55.0

153.9

110.4

Rationalization charges

3.0

5.0

3.9

6.1

Income from operations

75.2

67.7

132.0

125.1

Interest and other debt expense before loss

on early extinguishment of debt

29.1

16.9

49.6

33.3

Loss on early extinguishment of debt

4.4

-

7.1

-

Interest and other debt expense

33.5

16.9

56.7

33.3

Income before income taxes

41.7

50.8

75.3

91.8

Provision for income taxes

13.8

17.5

24.1

31.9

Net income

$

27.9

$

33.3

$

51.2

$

59.9

Earnings per share: (1)

Basic net income per share

$

0.25

$

0.28

$

0.46

$

0.50

Diluted net income per share

$

0.25

$

0.27

$

0.46

$

0.49

Cash dividends per common share (1)

$

0.09

$

0.09

$

0.18

$

0.17

Weighted average shares (000’s): (1)

Basic

110,358

121,009

110,291

120,953

Diluted

111,326

121,719

111,267

121,682

(1)

Per share and share amounts have been adjusted for the two-for-one
stock split that occurred on May 26, 2017

SILGAN HOLDINGS INC.

CONSOLIDATED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

For the quarter and six months ended June 30,

(Dollars in millions)

Second Quarter

Six Months

2017

2016

2017

2016

Net sales:

Metal containers

$

529.7

$

529.6

$

995.9

$

983.1

Closures

349.1

206.5

546.8

402.6

Plastic containers

143.0

138.5

284.5

281.7

Consolidated

$

1,021.8

$

874.6

$

1,827.2

$

1,667.4

Income from operations:

Metal containers (a)

$

49.4

$

45.9

$

93.3

$

83.5

Closures (b)

33.8

25.3

57.6

49.8

Plastic containers (c)

6.7

1.0

13.5

1.1

Corporate (d)

(14.7

)

(4.5

)

(32.4

)

(9.3

)

Consolidated

$

75.2

$

67.7

$

132.0

$

125.1

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in millions)

June 30,

June 30,

Dec. 31,

2017

2016

2016

Assets:

Cash and cash equivalents

$

142.1

$

120.5

$

24.7

Trade accounts receivable, net

528.4

394.8

288.2

Inventories

830.9

806.5

603.0

Other current assets

68.0

45.6

46.3

Property, plant and equipment, net

1,452.6

1,165.1

1,157.0

Other assets, net

1,872.6

1,021.7

1,030.2

Total assets

$

4,894.6

$

3,554.2

$

3,149.4

Liabilities and stockholders’ equity:

Current liabilities, excluding debt

$

630.4

$

508.4

$

644.7

Current and long-term debt

3,093.8

1,935.1

1,561.6

Other liabilities

627.4

421.3

473.7

Stockholders’ equity

543.0

689.4

469.4

Total liabilities and stockholders’ equity

$

4,894.6

$

3,554.2

$

3,149.4

(a)

Includes rationalization charges of $2.2 million and $4.0 million
for the three months ended June 30, 2017 and 2016, respectively, and
$2.9 million and $4.0 million for the six months ended June 30, 2017
and 2016, respectively. Includes a $3.0 million charge for the three
and six months ended June 30, 2017 related to the resolution of a
past non-commercial legal dispute.

(b)

Includes rationalization charges of $0.3 million for each of the
three months ended June 30, 2017 and 2016 and $0.4 million for each
of the six months ended June 30, 2017 and 2016.

(c)

Includes rationalization charges of $0.5 million and $0.7 million
for the three months ended June 30, 2017 and 2016, respectively, and
$0.6 million and $1.7 million for the six months June 30, 2017 and
2016, respectively.

(d)

Includes costs attributed to announced acquisitions of $9.8 million
and $23.0 million for the three and six months ended June 30, 2017,
respectively.

SILGAN HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended June 30,

(Dollars in millions)

2017

2016

Cash flows provided by (used in) operating activities:

Net income

$

51.2

$

59.9

Adjustments to reconcile net income to net cash

provided by (used in) operating activities:

Depreciation and amortization

83.3

73.0

Rationalization charges

3.9

6.1

Loss on early extinguishment of debt

7.1

-

Other changes that provided (used) cash, net of effects from
acquisition:

Trade accounts receivable, net

(118.5

)

(111.6

)

Inventories

(134.4

)

(176.4

)

Trade accounts payable and other changes, net

(31.4

)

(13.6

)

Net cash used in operating activities

(138.8

)

(162.6

)

Cash flows provided by (used in) investing activities:

Purchase of business, net of cash acquired

(1,022.1

)

-

Capital expenditures

(81.3

)

(111.7

)

Proceeds from asset sales

0.5

8.8

Net cash used in investing activities

(1,102.9

)

(102.9

)

Cash flows provided by (used in) financing activities:

Dividends paid on common stock

(20.3

)

(20.9

)

Changes in outstanding checks – principally vendors

(78.9

)

(101.8

)

Net borrowings and other financing activities

1,458.3

408.8

Net cash provided by financing activities

1,359.1

286.1

Cash and cash equivalents:

Net increase

117.4

20.6

Balance at beginning of year

24.7

99.9

Balance at end of period

$

142.1

$

120.5

SILGAN HOLDINGS INC.

RECONCILIATION OF ADJUSTED NET INCOME PER DILUTED SHARE (1)(2)

(UNAUDITED)

For the quarter and six months ended June 30,

Table A

Second Quarter

Six Months

2017

2016

2017

2016

Net income per diluted share as reported

$0.25

$0.27

$0.46

$0.49

Adjustments:

Rationalization charges

0.02

0.03

0.02

0.03

Loss on early extinguishment of debt

0.02

-

0.04

-

Costs attributed to announced acquisitions

0.06

-

0.14

-

Adjusted net income per diluted share

$0.35

$0.30

$0.66

$0.52

SILGAN HOLDINGS INC.

RECONCILIATION OF ADJUSTED NET INCOME PER DILUTED SHARE (1)(2)

(UNAUDITED)

For the quarter and year ended,

Table B

Third Quarter

Year Ended

September 30,

December 31,

Estimated

Actual

Estimated

Actual

Low

High

Low

High

2017

2017

2016

2017

2017

2016

Net income per diluted share as estimated

for 2017 and as reported for 2016

$0.64

$0.71

$0.57

$1.40

$1.50

$1.27

Adjustments:

Rationalization charges

-

-

0.04

0.02

0.02

0.10

Loss on early extinguishment of debt

-

-

-

0.04

0.04

-

Costs attributed to announced acquisitions

-

-

-

0.14

0.14

0.01

Adjusted net income per diluted share

as estimated for 2017 and presented for 2016

$0.64

$0.71

$0.61

$1.60

$1.70

$1.38

(1)

The Company has presented adjusted net income per diluted share for
the periods covered by this press release, which measure is a
Non-GAAP financial measure. The Company’s management believes it is
useful to exclude rationalization charges, costs attributed to
announced acquisitions and the loss on early extinguishment of debt
from its net income per diluted share as calculated under U.S.
generally accepted accounting principles because such Non-GAAP
financial measure allows for a more appropriate evaluation of its
operating results. While rationalization costs are incurred on a
regular basis, management views these costs more as an investment to
generate savings rather than period costs. Acquisition costs
attributed to announced acquisitions consist of third party fees and
expenses that are viewed by management as part of the acquisition
and not indicative of the ongoing cost structure of the Company.
Such Non-GAAP financial measure is not in accordance with U.S.
generally accepted accounting principles and should not be
considered in isolation but should be read in conjunction with the
unaudited condensed consolidated statements of income and the other
information presented herein. Additionally, such Non-GAAP financial
measure should not be considered a substitute for net income per
diluted share as calculated under U.S. generally accepted accounting
principles and may not be comparable to similarly titled measures of
other companies.

(2)

Per share amounts have been adjusted for the two-for-one stock split
that occurred on May 26, 2017.

STAMFORD, Conn.--(EON: Enhanced Online News)--Silgan Holdings Inc. (Nasdaq:SLGN), a leading supplier of rigid packaging for consumer goods products, announced today that its Board of Directors decl... more »